New law ends privilege license taxes on businesses beginning July 2015

Published: Tuesday, June 3, 2014 at 3:03 p.m.

Last Modified: Tuesday, June 3, 2014 at 3:03 p.m.

Wilmington and other cities will no longer be able to levy privilege license taxes on businesses beginning July 1, 2015, under a bill recently signed by Gov. Pat McCrory.

The new tax law could poke a $1.7 million hole in the city's recently penned budget, said Tony McEwen, the city's director of legislative affairs.

Cities and towns can apply the tax with restrictions in the 2014-15 fiscal year. But because of Wilmington's unique billing cycle for the tax, the city would not see most of the revenue intended under the one-year buffer, said McEwen.

City leaders are hoping lawmakers will make what they are calling a technical correction.

"All we want is the same one-year buffer everyone else is getting," McEwen said.

Statewide, the N.C. League of Municipalities estimates the fiscal cliff for cities and towns for loss of the tax to be in the neighborhood of $62 million. A privilege tax is a decades-old tax that is meant to cover a municipalities' costs for such things as fire and police protection of the businesses within its limits.

McCrory and leading tax writers, including state Sen. Bill Rabon, R-Brunswick, say a solution is in the works that will be addressed in the next legislative session to help replace some of the lost revenue.

"I asked for and received from each of them (the chambers' respective finance committee heads) a commitment that they will work with local governments during the next year to find a resolution that reforms the local tax option and addresses lost revenue, prior to the sunset date," McCrory said in a statement.

Some lawmakers have signaled the alarm that property taxes could go up if a solution isn't found.

State Rep. Susi Hamilton, D-New Hanover, said during a recent committee hearing that she feared that the loss of revenue would translate into a property tax increase.

"If we cut this down that dramatically, property taxes in my city will have to go up dramatically in an effort to cover the loss," Hamilton said then. "That will hurt economic development like you've never seen."

<p>Wilmington and other cities will no longer be able to levy privilege license taxes on businesses beginning July 1, 2015, under a bill recently signed by Gov. Pat McCrory.</p><p>The new tax law could poke a $1.7 million hole in the city's recently penned budget, said Tony McEwen, the city's director of legislative affairs. </p><p>Cities and towns can apply the tax with restrictions in the 2014-15 fiscal year. But because of Wilmington's unique billing cycle for the tax, the city would not see most of the revenue intended under the one-year buffer, said McEwen. </p><p>City leaders are hoping lawmakers will make what they are calling a technical correction. </p><p>"All we want is the same one-year buffer everyone else is getting," McEwen said. </p><p>Statewide, the N.C. League of Municipalities estimates the fiscal cliff for cities and towns for loss of the tax to be in the neighborhood of $62 million. A privilege tax is a decades-old tax that is meant to cover a municipalities' costs for such things as fire and police protection of the businesses within its limits.</p><p>McCrory and leading tax writers, including state Sen. Bill Rabon, R-Brunswick, say a solution is in the works that will be addressed in the next legislative session to help replace some of the lost revenue. </p><p>"I asked for and received from each of them (the chambers' respective finance committee heads) a commitment that they will work with local governments during the next year to find a resolution that reforms the local tax option and addresses lost revenue, prior to the sunset date," McCrory said in a statement.</p><p>Some lawmakers have signaled the alarm that property taxes could go up if a solution isn't found. </p><p>State Rep. Susi Hamilton, D-New Hanover, said during a recent committee hearing that she feared that the loss of revenue would translate into a property tax increase. </p><p>"If we cut this down that dramatically, property taxes in my city will have to go up dramatically in an effort to cover the loss," Hamilton said then. "That will hurt economic development like you've never seen." </p><p>Metro desk: 343-2384</p><p>On <a href="http://www.starnewsonline.com/section/news41"><b>Twitter</b></a>: @StarNewsMolly</p>